The transformation of claims through data

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Applying data enrichment at point of claim as well as at quote could transform the claims process and help improve the sector’s resilience to fraud, writes Neill Slane of LexisNexis Risk Solutions

Concerns over the potential rise in insurance fraud as an outcome of the pandemic may lead to a fresh look at how claims could be managed. The creation of market-wide historical claims databases in home, motor and commercial have the potential to change how the market assesses claims and identifies flags for fraud. 

With household finances under pressure, the fear is that opportunistic and organised fraud will rise. At the same time, many small business owners are facing challenging trading conditions. Fraudulent claims were already increasing in 2019, up 5%, according to Association of British Insurers (ABI) figures. Based on its experiences in the 2008 recession, the insurance sector believes the current economic climate could give rise again to a significant increase in fraud.

Insurance providers are already highly adept at spotting the clues to potentially fraudulent activity. But while methods of fraud detection and prevention have increased in sophistication in response to the constant threat, it was only recently that the ABI revealed 107,000 fraudulent insurance claims worth £1.2 billion were uncovered by insurers in 2019. That is a new scam uncovered every five minutes—or 300 a day

To help tackle this constant and increasing challenge, we anticipate a growing appetite to bring more data and analytics into the claims process to help providers make more informed decisions about claims strategies. This could not only help spot potential fraud but also help support the fairest treatment for customers.

Data enrichment is already playing an extremely valuable role in helping the industry price policies accurately and fairly. The logical next step is to apply the same level of data enrichment to claims to build a more detailed understanding of the claimant and the circumstances of the claim. Much of this data already exists and is being fed into the insurance ecosystem.

The real value will come from industry-contributed data. Policy history data gathered from more than 85% of the motor market is now enabling data scientists to find correlations between an individual’s past policy behaviour and the risks of cancellation, their likelihood to claim, and the cost of that claim. Similar to policy history data, quote behaviour data (gathered for over half a decade) is bringing a further layer of understanding to those risks, including the risk of fraud.

These attributes are now used alongside traditional rating factors to help refine pricing, retention and underwriting strategies, and to help prevent fraud. 

Building on these insights, the next innovation in contributory data that is set to have a significant impact on claims management strategies is the creation of a market-wide claims history database. This will help provide a clearer understanding of past claims, including the circumstances surrounding the claim, the settlement reached, and the parties involved.

As well as understanding whether a customer had a prior claim or not at the point of quote, it will allow the insurance provider to understand the specifics of the claim, when it occurred and how much it was settled for. Building this greater context and understanding of past claims can enable the market to understand how a new claim ‘fits’ with what may have happened in the past and inform the potential treatment strategy for the current claim.

For home and commercial property insurance, prior claims for the property also need to be considered—for example, past damage to the property from windstorms, escape of water, subsidence, flooding. How often has this happened? How much did each claim cost? This rich claims data could be used to help the insurance provider more fully assess the new claim with wider context.

In time, as the claims database grows, so too will the analytical insights we can draw from the data. 

Applying data enrichment at point of claim as well as at quote could transform the claims process and help improve the sector’s resilience to fraud.

The transformation of claims through data - Neill SlaneNeill Slane is senior vertical market manager for claims and insurance at LexisNexis Risk Solutions in the UK and Ireland

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